Merger between Netcare and Lakeview Hospitals blocked

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The Competition Commission has prohibited a merger between JSE-listed Netcare and Lakeview Hospitals. Business Day reports that according to the commission, the tie-up lessens, or prevents, competition in the Benoni and Johannesburg area and results in higher hospital prices for insured patients who utilise the Lakeview Hospital.

The commission uncovered the 2016 Lakeview merger, which had already been implemented, during its investigation of the Netcare and Akeso Group merger earlier in 2017. The commission in May wrote to the merging parties and requested notification of the merger in order to allow it to assess its competitive effects.

Netcare operates 57 hospitals and has chosen not to respond to the ruling “for now”. The group already operates the Netcare Linmed Hospital and Netcare Optiklin, an eye hospital, in the Benoni area.

The commission noted that the price differentials between the tariffs of Netcare and Lakeview Hospital had been more than the consumer price inflation on most procedures. Lakeview Hospital’s services include obstetrics, gynaecology, paediatrics, dentistry, orthopaedics and dermatology. The report says the Competition Commission also believed that the merger resulted in the removal of the Lakeview Hospital as an effective competitive constraint in the Benoni area.

“This is because the Lakeview Hospital was a better competitive constraint against the Life Healthcare hospital in the Benoni area in terms of tariffs and the replacement of Lakeview Hospital by Netcare is unlikely to improve competition against Life Healthcare because both Netcare and Life Healthcare are large hospital groups who charge higher tariffs,” it said.

The commission added that the merger removed a cheaper alternative from the Benoni area. “This outcome is unlikely to be beneficial for the patients in the Benoni area,” it said.

Business Day report

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